2019 (4) TMI 1418 - AT - Service Tax

Classification of service - Cargo Handling Service or otherwise? - activity of transportation of the minerals from the mine s pithead to the railway siding (part of the mine) and loading the same into railway wagons - HELD THAT - To call an activity to be cargo handling service there should be an activity of movement of cargo from one place to another place without any internal movement within the mining area. Neither handling service outside the mining area is evident from the adjudication order nor destination outside such area has come to record. Therefore, when the factual evidence demonstrates movement of the excavated minerals within the mining area from one place to another, that operation cannot be called as cargo handling service. The agreement itself provides for detailed break-up of rates for each of the four activities to be undertaken by the appellant. A plain reading of these rate schedules will show that the essence of the contract is for transportation of mineral within the mining area. The Board vide circular dated 29-2-2008 clarified the application of Section 65A while classifying a composite service - The definition of cargo handling service under the Finance Act, 1994, does not include the kind of activities undertaken by the appellants and hence the same are not chargeable to service tax. Thus, the demand of ₹ 80,62,565/- in respect of cargo handling service in the first appeal is set aside. Demand of ₹ 20,96,816/- on site formation services - HELD THAT - The activity of making of 100 meters dia holes with contractors own equipment is not one relating to site formation - definition of Site formation and clearance, excavation and earthmoving and demolition as defined under Section 65(97 a) of Finance Act, 1994 as amended covers Drilling, boring and core extraction services for construction, geophysical, geological or similar purposes; but in the instant case, the appellants activity is limited to supply of the machine and men. The entire job is undertaken by TISCO people and there is no liability on the part of the appellant - the appeal on this count also succeeds. Penalty - HELD THAT - There was no suppression or mis-statement by the appellants regarding the nature of activities undertaken by the appellants and hence the imposition of penalty on them is not at all justified - appeal allowed. Appeal disposed off.

Summary

Issues involved:
1. Classification of services provided by the appellant as cargo handling services for the period from August 2005 to March 2010.
2. Taxability of services provided by the appellant under site formation and maintenance and repair services.
3. Imposition of penalty on the appellants for alleged suppression or misstatement of facts.

Issue 1: Classification of services as cargo handling services:
The appellants, engaged in transporting minerals within a mining area, contested the classification of their services as cargo handling services. The authorities demanded service tax based on the activities of trucking, loading, unloading, and hauling of minerals. The appellants argued that their work did not fall under cargo handling services and that certain activities were wrongly categorized. The Tribunal analyzed the statutory definition of cargo handling services and the terms of the agreement between the parties. It was observed that the essence of the contract was transportation of minerals within the mining area, with incidental loading and unloading activities. Relying on precedents, the Tribunal held that the activities undertaken did not fit the definition of cargo handling services, and thus, the demand for service tax under this category was set aside.

Issue 2: Taxability under site formation and maintenance services:
Regarding the demand for service tax under site formation services for making holes and maintenance and repair services, the Tribunal examined the nature of activities undertaken by the appellants. It was noted that the appellants' role was limited to supplying equipment and labor, with the primary job being executed by the contracting party. The Tribunal concluded that these activities did not fall under the specified categories for service tax, leading to the success of the appeal on these counts.

Issue 3: Imposition of penalty:
The Tribunal found no evidence of suppression or misstatement by the appellants regarding the nature of their activities. Consequently, the imposition of a penalty was deemed unjustified, and the impugned order was set aside. The appeals were allowed, providing consequential benefits to the appellants, except for the demand under maintenance service, which was not disputed.

In a related appeal, where the Revenue contested the classification of activities as cargo handling services, the Tribunal upheld its decision that the activities did not qualify as such. The appeal filed by the Revenue was dismissed, affirming the order of the Commissioner.

The judgment pronounced on 07/01/2019 by the Appellate Tribunal CESTAT KOLKATA provides a detailed analysis of the issues involved, clarifying the taxability of services provided by the appellants and addressing the imposition of penalties, thereby offering significant relief to the appellants based on the interpretation of relevant legal provisions and precedents.